tv Nightly Business Report PBS July 12, 2013 7:00pm-7:31pm PDT
this is "nightly business report" with tyler and susie. >> you get close to local life, to cultural treasures. vieging river cruises, exploring the world in comfort. bad dream, boeing's dreamliner faces a crisis as an empty jet catches fire in london. >> tug-of-war, good bank earnings on one side, a warning on the other and both could have implications for your investments. >> and risky business, more baby boomers are learning how to trade options as they near retirement but do the risks outweigh the reward? we'll have that for "nightly business report" on friday, july 12th. this was not a good day for
boeing or it's 787 dreamliner or the investors. shares down 5% keeping the dow under pressure from midday on. that was when news hit that an empty ethiopian 787 dream liner caught fire at london's health row airport. it's involving a new aircraft so critical to boeing's future and seth caplin says investors need to pay attention to these kinds of events. >> from a perception perspective for boeing, these things are not helpful. investors are going to be looking for some certainty here. they will be looking for, you know, is this just the latest thing? is there something else going forward we don't know about? >> not helpful to put it mildly and if the fire was not enough, in a accept brett incident a thompson airways 787 to florida was forceed to return to britain's manchester airport
after a technical problem on board. all aboard were safe. officials haven't said what caused the problems on either plane, but investors didn't wait for an explanation. after hitting a 52-week high early today, boeing shares nosedived and caught in the downdraft, some of boeing's top suppliers and parts makers like spirit air systems down 2%. coming up, the market monitor guest will say whether he thinks boeing is a good long-term investment. that news overshadowed a tug-of-war on wall street today with blowout bank earnings battling a troubled warning from a belt weather. we'll have more in just a moment. but what surprised invelst tors is ups warning profits will be lower as customers find cheaper ways to ship. they say they see a slowdown in the u.s. industrial economy. ups shares tumbled 6% and that
news weighed down the stocks. by the closing bell stocks rebounded and even posted new records. the dow added and the s&p up five points and the nasdaq added 21 points. what is behind the warning behind ups and what could it mean for the overall economy? hampton pearson explains. >> reporter: the latest indicated the global economic recovery has a long way to go comes from united parcel service. ups says there is an over capacity in the global air freight market and they are looking for cheaper solutions, even if they take more time. economists say it is bellwethers for the global economy. >> i do think that the slow down that we seen across the globe coming into the summer was more than anyone anticipated. i think most of the transportation companies,
delivery companies expected better, more and had access capacity. so, you know, i think they were surprised by this. >> reporter: ups says it's expecting profits this year to be higher than 2012, including solid growth in the second half of the year. on going labor negotiations is another factor impacting package volume growth but retail analysts view that as a short-term problem. >> i think ups will rebound and will regain some -- or rebuild and ramp up on new customer acre session again but that was a probably soft spot in the second quarter, as well, while as shippers maybe chose fedex or ups due to those negotiations. >> reporter: meanwhile, ups is counting on growth in ground transportation and small package business in the second half of the year to offset lower profits and slower growth in the global air fright competition. for "nightly business report,"
i'm hampton pearson. >> one bright spot in today's trading, big profits from jp morgan and wells fargo delivered better than expected quarterly earnings. jp morgan profits surged 31% to $1.60 a share, 16 cents more than analysts estimates. revenue also better than expected, up 14%. wells fargo posted a gain of 19% or 9 8 cents a share, a nickel higher and the recent jump in interest rates and drop off in lending in the mortgage market but the ceo of jp morgan said they will continue to do well as interest rates move higher. >> all equal, it may knock down mortgage origination but have you have a healthy economy that will filter through. all things equal, a good thing as long as the economy is growing. >> as for the outlook for the u.s. economy, diamond is also pretty upbeat.
>> the american economy is getting -- slowly getting stronger, so the lending will come back when people have more confidence and do more capital investing. we're confident you'll see growth over the years as america recovers. >> we'll learn more about the outlook for the banking sector next week. citi group reports it's earnings on monday. here to give us more analysis on those bank earnings today and a look ahead to next week, fred cannon, director of the bank research firm keith, bia and woods. >> thanks. >> what were the highlights and low lights in jp and wells, more highlights than low? >> there were. fee revenues, both companies stronger than expected and credit. these companies have big legacy asset port fo portfolios and cr tight for three years so no problems with credit developing.
they are releasing reserves they made for loans and that's a key element to the growth. >> fred, do you think we'll hear the same story line when sciti reports and bank of america? >> i think so. as jamie diamond said in the previous segment, this is getting to be a better environment for banking. higher rates while there are negatives are a better thing because the spread of what you can earn on lending ver suls su cost of deposit. home prices are drifting up in the u.s. and the recent runup in interest rates isn't dampening that. those are a good backdrop for second kwaurquarter earnings. >> what are they doing so well? i'm not talking about the big ones, though, that's the main focus tonight. what are the mid-sized guys doing well? >> lending. if you look at the data for the second quarter, the large banks lending increase was over 1%, not great.
the small banks overall was about 8%. so really, the small banks are the ones out there aggressively getting out there with customers and making loans. that's what they do and that's why stock prices are doing well. >> when we look at the bank index, it's been pretty much on the rise since the beginning of the year. do you see that continuing, and are there any stocks big or small in the banking sector that you are recommending? >> we do think it's a good environme environment. interestingly, the evaluations are kind of stretched, so they get nervous at this point in time. we were up 25% year to date and after a good run last year but the key bank index is 40% below the peak precycle. a lot had to do with delusion but low interest rate environment keeping -- keeping earnings down. as interest rates rise and home prices go up, it's a good environment. citi is a great investment and should do well.
nervous about emerging market issues but should do fine there is a number of regional banks. you should look upstate new york to buffalo there is a couple banks that we're big on right now. first niagra had a tough time. >> it's a good lending environment for banks because they can command more on the loan rates and their cost of securing deposits is low. another way of saying that is they raised their loan rates but haven't raised deposit rates. do you expect them to raise deposit rates soon? >> no, the banks are swimming in liquidity. so we think there will be plenty of deposits around for a long period of time. if you're a saver, don't expect cds to go up -- >> that's what i'm asking, fred cannon, thanks very much. director of research. >> great to be on, thanks. >> big changes happening in cuba. the hard line socialist government invited a select group of business journalist to get an up close look at the
economy and reforms being made. so what is new and why now? michelle cabrera is one of those journalest on the ground in havana and has the report. >> reporter: although the cuban government says it's fully committed to socialism it invited journalists to show us what they are making changes to take the government out of the economy, individuals are allowed to no longer work for the government and instead, start their own small businesses in select areas. wherever you go, you see shops in doorways and windows. but just to show you how far they still have to go, the example that the cuban government showed to the journalist was a store front where they sold religious clothing and manufactured in the back. working on 1950 singer sewing machines. the owner of the shop said she's clearing $130 a month after all her expenses. that's a lot of money in a
country where the average cuban makes $19 a month. other changes are coming in the transportation sector where they are encouraging workers to form cooperative, to try to relief the terrible, terrible situation with buses, which are packed and terrible for riders in the sweltering heat. many are asking whether what's happening in cuba right now is similar to what happened in china in 1980 when that country began a series of massive reforms. the cuban government says absolutely not, it will still always be socialist and these changes are only to make so socialism in their words, more sustainable. i'm michelle cabrera in havana cue back. >> if you want to learn more, log on nbr.com. tennis, bridge and options trading? find out why baby boomers are do it yourself option investors and
what they may risk in the process but first, let's look how the international markets finished today. soaring would prices trickled down to higher prices at the pump. aaa reports the average price for a gallon of unleaded is 3.55, up 3 cents from yesterday. that's the largest one-day spike since february and expects say the pain at the pump is likely to get even worse this weekend. toyota's popular rav4 small sized suv scored a score of good for highway safety but in one demanding crash test they received the worst possible score. in the so-called small over lap test which involves crashing a
vehicle at 40 miles an hour into a 5-foot high barrier on the driver's side over lapping a quarter of the vehicle's entire width. the top-rated, subaru forester and mitsubishi out lander. alwian rocketed today to an all-time high. they make so-called orphan drugs to treat rare disorders. they gained 12.5%. also in healthcare, afina health jumped to a 20% high. this software sign add contract with a large healthcare system. shares closed near that all-time high at 109.75. >> and web md said bio farmers are buying more ads and
sponsorships. web md shares new high closed up more than 25% at 33. $82. h and r block selling to avoid stricter regulations and investors say yay and they said let's move those shares higher, which they did. new high, triple volume closing at $43.63. after the bell at&t said it's belling leap wireless for 15 dollars per share in cash, a $7 premium over the closing price. leap operates a prepaid wireless service, which at&t will continue to deal subject to fcc review. shares of at&t were flat after hours as you see there, while leap shares, well they leaped. market monitor expects the stock rally to continue for the next 12 months.
chief investment strategist at russell investments. welcome. >> thank you. >> we reported a bunch of new highs, this is an amazing run for the stock market. what do you think will drive stocks higher over the next 12 months? >> well, a couple things, but i'll go back to the source of the strength in the markets this week because of gentle ben. we didn't see he said anything new in terms of the federal reserve. what he said was the economic news is getting better, the u.s. economy is getting closer to not needing the full stimulus and they will consider pulling some of that back, and we think that's good news for stocks and good news for earnings going forward because we think that great, economic growth will accelerate here and in europe in the back half of this year. plus, you know, the roads of equities to fixed income and cash is still there. those others don't look attractive and that will probably drive multiple expansions. good earnings and the fact that there is nowhere else to go
probably drives stocks forward. >> as you know, eric, we've been watching viewers to send in their questions about individual stocks and we'll start with one right in your backyard, which i know you must be familiar with. robert b in long beach california wrote in object boeing. he said i would like your analysis of boeing, the company had backlogged, controls, future products in demand and u.s. carriers have ageing fleets. that against the backdrop of two insuran incidents that handicapped the stock. >> absolutely. why don't we hold as much of boeing as people think we might? relative valuation of boeing versus other stocks. boeing with today's 5% pull back which you noted earlier in the broadcast is up 35% year to date. it's actually had a very good one-year return. we think that it's a good stock, good company, just a little
pri pricey at this level. >> linda says saw your program for the first time tonight, we hope, linda, you keep watching. she bought sony at $12 a share and now it's over $21. she wants to know sell it or hold on? what do you think? >> well, that's another stock we're under weight and meaning under weight. she may want to consider a company like samsung. sony is another story of stock price is spectacular. they benefitted from being in japan where samsung's market in co correia has not done well. >> let's move to missouri where matt h is interested in sea drill. he says i enjoy your show each weeknight and find it informative. we're grateful to you for that. can you please look at sea drill ticker sdrl and tell me what the future looks like for the company and dividends.
>> they are an offshore drilling contractor so they own oil rigs and drill off them. businesses has been good for them since oil prices are high. in response they have taken out a lot of debt because oil rigs are expensive and significantly increased capacity, which isn't a problem on it's own. the industry as a whole has done that. we think that will come under price pressure in the future because so much new capacity will come online and the other problem is debt they have taken on, hard to refinance interest rates. interest rates are likely to move higher. >> thanks for those good suggestions. we appreciate it. chief investmente strategist at russell investments. trading options, give investors the right but not the obligation to buy or sell financial products and since stock prices change all the
time, it is a risky business. but as jane wells shows us, more people are diving into the options world and not all young wall street hot shots. >> it will be the change in an option's value, one unit change in time. >> reporter: in a library in huntington beach, california. >> you talk to a butterfly guy or calendar guy, what will they say. >> reporter: folks that paid $600 to trade options. >> volatility only affects time premium. >> reporter: dan and peter used to do this, now they run seminars for the world's largest options exchange, the cbeo. who shows up? >> a male between the ages of 50 and 58. you get a few women there, maybe three women. >> reporter: why are boomers dabbling in options? it cost less money than buying stocks, more exciting, you can get profits more quickly or lose them and a way to manage risk. he's a former airline pilot.
>> i don't go to vegas and gamble but here you control your own risk. you set the rules. >> reporter: but this stuff is tough to learn and easy to screw up. >> i might be good on a trade six out of ten times, and that's considered to be a good trader. >> reporter: oh my gosh, baby boomers are trading options, red alert, sitting ducks, get ripped off, lose everything? >> right i'm concerned as an educator start slowly and it takes a good year or two in many trades under your belt to get profish at this stuff. >> reporter: take steve burnet, a 57-year-old pastor from colombia, south carolina who traded stocks for many years and decided to kick it up a notch with options. >> studying candle stick formations. >> reporter: he settled on a strategy of selling puts which allows investors to sell at an underlying stock for a fraction of the cost of the share price. it can be scary like the time he meant to buy five apple
contracts and accidently bought 105. >> which represents $4.5 million. scared the heck out of me before i could sell it and get it off my books. i don't know how e trade let it go through. >> reporter: they made him the most money. >> nobody gets into it for that. >> reporter: looks like they are in a game with greater risks and rewards. jane wells, los angeles. and coming up on the program, the one-year anniversary of yahoo's new ceo marissia mayer. this past year is anything but dull and we'll look how the company changed and the challenges ahead. first how commodities, currencies and treasuries performed today.
marissia myer is experiencing with invasions at yahoo and stirred up controversy. she's been one of the most watched ceos and as her one-year anniversary approaches, we'll hear many reviews on her performance. so how is she doing? jon fortt takes a look. >> reporter: it had the makes of a no-win situation. the super star was swooping in trying to save the bad news bears of tech but somehow it looks like marissia myer is pulling it off. a year into her stint at yahoo ceo the stock is up 72%. not because of some dramatic business turn around. the genius of mier's first year is she's taken a mediocre hand and played it almost flawlessly, creating a vision, setting ex piece takes low and generating the right headlines at the right times. the year had challenges.
right off the bat she announced she was pregnant and would take minimal maternity leave, they prized her and vil fied her. the relatively small number of workers, 200 out of 12,000 would have to report to the office. the reason, collaboration coming up with new ideas will be key to the future. critics, including sir richard branson pounlsed. how can an internet company squash tell it? free food, friday afternoon staff meetings and key hires helped boost moral. glass doors pegs her approval rating at 85%, lower than time cook and larry page. >> the moral levels yahoo improved significantly to the extent that she does seem to be
a very, very well-founded and well-positioned leader with a strong strategy view for the company. >> reporter: to keep a good thing going, though, myer will probably have to get yahoo growing. sales are flat since she took over and brand advertiseding is actually down. wall street is hoping for a little growth news when yahoo reports earnings tuesday. if myer can pull that off, year two will be off to a good start. for "nightly business report," i'm jon fortt. finally tonight, you've been waiting and they are back. twinkies started arriving on select walmart shelves today after hostess went bankrupt and stopped making them but private equity owners bought the rights to the treats and they are flying off store shelves. shopers at a new jersey walmart were happy to see the return of the twinge keys. >> look. they are back. as soon as they came on the walmart flier, here we are.
>> the best dessert. >> how long they been going, a couple years? >> now that i'm a grown man i can't have too many sweets? >> i can't eat them. >> reporter: why not? >> that's how i stay looking like this. the doctor told me to stay away from that. >> twinkies can be found at retailers nationwide on monday with one big difference. they have a shelf life of 45 days, nearly three weeks longer than they used to have. i'm not sure suzy, i should be come forpted by that necessarily. >> this whole come back is amazing. starting on monday from time square they will have a bus tour going across the country -- >> a twinkies bus tour. >> giving away free twinkies. >> how do we get on that route? bring them by angle wood for it. >> that's nightly business report for us. i'm suzy gharib. thanks for watching. >> i'm tyler. thanks for joining us.
details continue to emerge about the asiana crash showing the response by the pilots and first responders. the bay bridge flip-flops from a delayed opening to a new proposal that could keep it on schedule. big developments in higher education. homeland security secretary janet napolitano nominated to head the uc system. plus, city college of san francisco fights for its survival. mounting pressure in the state prison system. inmates stage a massive hunger strike while governor brown refuses to release thousands of prisoners to ease over crowding. and a controversial plan for affordable housing in marin provokes some communities to pull out of the development. coming up next.